Divorce Mortgage in MN – Tips, Tricks and General Rules

By Mitch Irwin NMLS #451627 | Equal Housing Lender (612)-210-3640 | mirwin@bellbanks.com   | www.mitchirwin.biz

 Tips, Tricks and General Rules concerning Divorce Mortgages in Minnesota

– When a loan is refinanced, the current escrow refund is normally issued as a joint check. Specify in the decree how this joint refund check should be handled.

– Appraisals are valid for 120 days. Lenders cannot use your appraisal, we must order our own. I recommend having the refinancing party’s lender order it to ensure they will accept the value. HVCC rules prohibit a lender having direct contact with an appraiser; so there should be no value influence on behalf of the bank or loan officer.

– Debt to Income (DTI) ratios normally max at 41-45%. Remember this is off gross income.

– Every $10k in a loan changes the payment approximately $50/month (on a 30 year).

– As a General Rule; most people can afford a loan amount 2 – 3 times their income. But really depends on other personal debt & expenses (auto loans, credit cards, student loans, day-care).

– Homes recently listed for sale can impact refinancing; specifically if the transaction will be considered “cash-out”. Normally limited to 70% of appraised value or have to wait 6 months.

– Portfolio loans can be an option when a borrower doesn’t quite fit all of the normal guidelines. See me for details regarding qualification, pros/cons, etc.

– I always offer to preview decree language to determine if it will satisfy lending guidelines.

 Bottom Line: Involve the lender early.

My initial planning meeting includes:

– Detailed review of credit report: Identify joint accounts, confirm debts, score review/booster.

– Budgeting Worksheet: Calculates a DTI ratio, also examines positive or negative cash-flow.

– Loan Analysis: Includes loan structure, monthly payment, down payment or equity needed.

– Impact of Support Payments: understand how paying or receiving impacts underwriting.

– Timeline: when to apply, order appraisal, submit to underwriting, when the loan can close.

– Decree Preview: review decree language before signing and recommend changes if needed.

– Key Issues: Identify any potential “Deal Killers”.

See also: Divorce Mortgage Issues – Quick Reference Guide

*All information is the opinion of the author based on past client experiences and lending guidelines. There may be exceptions to every situation based on each independent lender’s policies. Information is as current as possible, but subject to change at any time.* (3/14/13)


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